The US Supreme Court (SCOTUS) on 20 February 2026 delivered the most momentous decision in its 236-year history. Its significance lies in its worldwide impact on the tariffs imposed by the Trump administration. In a series of Executive Orders in January and February of 2025, the US Administration had imposed a broad spectrum of tariffs on all goods imported into the United States. These tariffs were issued under the International Emergency Economic Powers Act 1977 (IEEPA), which authorises the President to regulate imports during ‘national emergencies’.

The tariffs came in two tranches. The first, called “Trafficking Tariffs,” targeted imports from Canada, Mexico, and China at rates ranging from 10 to 25 per cent, intended to address the ‘national emergency’ of the ‘opioid crisis and related criminal threats’. The second set of tariffs, called “Reciprocal Tariffs,” was imposed on many trading countries, including India, to rectify US trade deficits, which were labelled as ‘threatening national security and economic interests’. The tariffs ranged from 10% up to 50%.

In May 2025, the US Court of International Trade (CIT) invalidated the tariffs. In appeal, the Federal Circuit Court of Appeals (by a majority of judges) agreed with the CIT.

The Trump administration challenged it before the Supreme Court of the United States (SCOTUS). The SCOTUS considered whether Trump could have used an emergency law, like IEEPA, previously never used for the purpose of imposing tariffs.

The core constitutional question, which has now been decided by the SCOTUS, was whether the President, under the IEEPA, had the authority to impose tariffs, which are essentially taxes on imports. IEEPA, it must be noted, only empowered the President to declare national emergencies and conferred a consequent series of powers in respect of certain foreign economic transactions, including on “importation or exportation,” when foreign interests are involved.

The SCOTUS decided two fundamental questions:

1. Whether the Constitution of the United States vests the taxing power, including the power to impose import tariffs, exclusively in Congress?
2. Whether the President had an independent power under the IEEPA to impose tariffs?

The majority opinion (6-3) of SCOTUS has favoured a literal reading of ‘IEEPA’. They did not endorse the administrative claim that the President had the right to impose tariffs without Congressional sanction. SCOTUS did not favour an interpretation conferring unchecked tariff levying powers to the President. A contrary interpretation would have been unprecedented and would have been a first in IEEPA’s 50-year-old history. The SCOTUS was emphatic that under Article 1, Section 8, the US Constitution granted Congress the exclusive power “to lay and collect Taxes, Duties, Imposts and Excises”. Tariffs being a core form of taxation, the framers of the Constitution vested that power solely in Congress and denied the President any inherent authority to impose peacetime tariffs. Tariffs, it said, are essentially a category of taxes under the Constitution. There were specific statutes empowering imposition of tariffs, such as the Trade Expansion Act of 1962, the Trade Act of 1974 and the Tariff Act of 1930. These have procedural and substantive limitations on the President’s tariff-making authority. They enable providing caps on tariff rates and tariff alterations, which require institutional investigations and consultative processes.

The verdict is categorical. The 6-3 of the SCOTUS has concluded that “IEEPA does not authorise the President to impose tariffs”. The minority opinion of Justices Thomas, Kavanaugh and Alito was in favour of empowering the President to grant flexibility in emergencies and also expressed fears that it could disrupt trade policy and create refund logistics issues.

This decision is bound to have a major impact on India’s exports, which were subjected to 50% tariffs from 27 August, 2025. The subsequent reduction to 18% still blunted India’s competitive edge, affecting a whole range of industries from textiles, gems and jewellery, mechanical appliances, and other labour-intensive industries. The estimated export impact was over 79.44 billion USD. India’s exports to the US alone account for 19% of our total exports and contribute about 2.3% to India’s GDP. To add to our woes, the foreign institutional investors had sold 2.5 trillion worth of Indian equities, which was driven largely by concerns over US Tariffs.

With Trump claiming further countermeasures, the SCOTUS verdict may not just have ended the tariff war. Only time will tell the fate of Indian exporters after the cataclysmic events of January and February, 2025.

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